Debenhams administration ‘national tragedy’ as 4,000 jobs put at risk

Sports Direct has dubbed Debenhams entering administration as a “disastrous outcome” which has led to “the complete destruction of shareholder value”.

Mike Ashley’s very public pursuit of Debenhams came to an end yesterday when Debenhams called in administrators who turned the company over to its hedge fund owners.

The move marked the end of a series of offers from Sports Direct to underwrite a rights issue that would reduce the department store’s crippling debt.

As many as 50 Debenhams stores could close as part of a pre-pack deal to sell the company out of administration, it has since emerged, with some 4,000 jobs facing the axe.

Debenhams in Market Street, Manchester

Sports Direct said it has been “ready to more than fight its corner” over the near-30% share it had built up, which cost Mike Ashley £150m.

The company added that “at every turn the Board of Debenhams, and more latterly the Lenders, have sought to stall, prevent or block constructive dialogue or progress being made, which has resulted in today’s disastrous and avoidable outcome.”

It said “all of Sports Direct’s proposals and offers of support have been rebuffed with scant constructive dialogue or discussion in the period leading up to this outcome”, adding that it had become “a national scandal”.

A statement from the firm said: “Sports Direct will not stop in its quest to get to the bottom of this appallingly managed process and to find and hold to account those responsible for this final turn of events. This is a tragedy. There is no other way of putting it, especially when a long-term solution was there for the taking.”

Mike Ashley

Mike Ashley added: “As normal, politicians and regulators fiddled whilst Rome burnt. These politicians and regulators have proven to be as effective as a chocolate teapot.

“I restate my call for the advisors to go to prison given their skulduggery in undermining shareholders and other stakeholders, such as employees and pensioners.

“Whilst these hedge funds look to close a significant number of stores and put thousands of people out of work, as politicians and regulators look on, I will go to the ends of the Earth to save as many Debenhams stores and jobs as I can, similar to the promise I made with regards to House of Fraser.

“While there may be some short term cost to Sports Direct and our shareholders, sometimes you have to do the right thing, something the board of Debenhams and the hedge funds have manifestly failed to do.

“I call on the authorities to reverse the administration process so that a full, better and appropriate solvent solution can be found.

“This solution would include allowing myself and appropriate senior Sports Direct management access to detailed information to save the business for all stakeholders.

“The board of Debenhams and its advisers have sought to stifle and exclude us from their so-called process and have undermined and blocked our various offers of assistance as they carried out their underhand plan to steal from shareholders.”

Dr Gordon Fletcher, a senior academic at the Salford Business School said: “With Debenhams being sold to its lenders arguably nothing has changed on the high street today.

“Fifty stores were already earmarked for closure and although these may now be accelerated, the attempt to stave off complete collapse comes as no surprise.

“The company is still burdened with the legacy of significant long term rental agreements coupled with a retail offering that is slow to change and, put bluntly, just safe.

“This pre-packaged administration agreement means that the lenders will want to rapidly sell the chain to the highest bidders as an ongoing concern. Before any potential buyers can be found there will certainly be a need for a company voluntary arrangement.

“The CVA is needed to help Debenhams  shed some of its high rental costs. The warning signs are also there that there may worse still to come. Previous CVAs used by other high street retailers for the same reasons have merely slowed the march to complete closure.

“In this way, the administration announcement may have already signalled the end of the traditional department store on the high street as we know it.

“Although Debenhams itself must now change in response to today’s change in ownership this is itself is also a threat to the wider high street.

“As an anchor tenant in many suburban and city centres, Debenhams plays a key role in drawing visitors to these locations.

“A department store brings reassurance and their wide range of items that means that visitors can satisfy a range of their needs alongside visits to other more specialist offerings.

“Anchor tenants are also large employers which means that the wages and their employees itself helps to sustain smaller stores in the same location.

“If Debenhams has to transform to make itself more appealing to new and existing generations of consumers then this change has repercussions for the entire high street.”